How do I Invest in Solar Energy?

by Bonnie Conrad

Solar power can be a wise investment.

If you are a strong proponent of solar energy and sustainable power generation, you might want to devote a portion of your portfolio to companies doing business in the industry. As an investor, you have a number of ways to play the solar energy arena, including pure plays like companies that make solar panels and more diversified investments like traditional energy companies who are branching out into solar power.

Decide how much of your portfolio you wish to devote to solar energy. In its Money 101 series, Money Magazine points out that asset allocation is the single most important factor in determining investment returns. The Securities and Exchange Commission also points out the importance of asset allocation in its Beginners Guide to Asset Allocation. Review your current asset allocation and stock market investments, and use that information to determine the right mix of solar energy investments for you.

Read the financial press and the traditional media as well. Look for news about companies, both traditional energy companies and new startups, that are making a commitment to solar energy. Note the names of these companies for further research.

Research the solar energy stocks you identified and look at their financial information carefully. Request an annual report for each company through the investor relations link on their website, and check the earnings and liabilities of each company. Look for companies with strong balance sheets, since it can take a lot of time and money to bring viable solar power solutions to market.

Seek out widely diversified mutual funds as well as individual stocks. A mutual fund can be a better way to play the solar energy market, since these funds hire professional stock pickers who comb through the financials of every company they consider. Look for funds labeled as alternative energy or green energy. Those funds tends to have a good percentage of their assets in solar power generation companies and related firms. Some mutual funds also have solar power funds available. These funds invest solely in solar power and related firms.

Review the information you have gathered and decide which stocks and funds suit you best. Make your purchases, either online at your broker or mutual fund website or through the mail with a paper application and a check. Consider setting up an automatic monthly investment to add to your position over time. This can allow you to accumulate more shares, and hopefully make more money.